Disney dumps Netflix, tickers tank, markets wrong

Well, this is fun! There are few things more enjoyable in this industry than the relentless pace of innovation and experimentation. If there’s one thing that sets the relatively new OTT world apart from traditional linear TV it’s the ability to turn on a sixpence (or a dime, in the case of US companies) and try something new.

This week has seen a perfect example, with Disney announcing that it will be pulling its content from Netflix and launching its own SVOD service… but not until 2019. Perhaps the industry doesn’t always pivot as fast we know it can.

Cheer up, Stock Market!

Regardless, the announcement underlines not only Disney’s certainty that it sees a bright future in VOD, but also that it plans to build a more direct relationship with its target audience. The market reaction to the news was interesting – Netflix stock dropped by almost 1.5% while Disney fell by almost 4%. This timid fear of the unknown is baffling. Could it be explained by the fact that Disney will be investing a further $1.58 billion to acquire a controlling share in technology platform BAMTech? Or that two years is a long time in this industry. Is there a terror that Netflix is but an empty vessel without Disney? Or perhaps the market feels it’s just a bad move for Disney to sacrifice its revenues from Netflix ($350m per year, according to analyst estimates).

My analysis is that in the medium terms this is not only a good move for Disney but it’s no bad thing for Netflix either. The fact that neither company’s stock has recovered from the post-announcement drop suggests that I’m more bullish about this than those gloomy folk in the financial markets. It’s worth noting that whilst Disney’s share price has seen a slight decline over the last year, Netflix is up over 75 points in the same period. Neither company is exactly on its knees. Should we worry that Disney’s announcement will herald the exit of more studios from Netflix’s portfolio? Maybe they will, but the salient point is whether it matters very much. It doesn’t.

A faster horse
Here’s the thing: many analysts and vocal commentators worry that consumers have little appetite for yet another streaming platform. We know that consumers are decreasingly loyal and that more and more households use multiple pay TV and streaming services, whether cable or satellite subscription, Amazon Prime, Netflix or something else as well. Do they really want yet another subscription? If you asked them they’d most likely say no, but if you provide an attractive service at a hesitation-free price point which a great, growing and changing line up of content then business will grow.

Look at this way: if we ate at the same restaurant every week, even if the menu changed, we’d get pretty bored. Us humans crave diversity. In the UK alone over 8.9 million households subscribe to at least one VOD service, and households with more VOD services watch more ‘television’ each day. This is hardly a surprise, but it does highlight that there’s more headroom for growth in this market yet and Disney is right to capitalise on it.

The finest trick
There are two great tricks that Netflix has played on the world. The first has been to mask the complexity of studio deals from its subscribers (though the effort and caffeine-fuelled late nights spent wrestling with studios to achieve that should not be under-estimated). The second has been to acquire and produce such a vast array of premium content that it can, in fact, lose an entire studio without many people actually noticing.

That’s not to denigrate the quality of Disney’s own library and future releases – far from it. The point is simply that with so much else to pick from most users will still manage to find something they want to watch. As Wired said in 2014, Netflix is great when you want to watch something, but terrible when you want to watch anything. That holds true today and is actually part of Netflix’s charm and attraction.

Netflix is the restaurant which will always delight in unexpected ways. Disney is where to go when you know exactly what you want, along with every other VOD platform which will eventually surface to offer the world something it didn’t know it was crying out to enjoy. Sure, it’ll need to be a pretty attractive service to attract enough subscribers to make up for the revenues it has forfeited from Netflix, but if there’s one studio with a vast library of great titles then it’s Disney.

And let’s face it, with an extra $350m (or so) per year in its pocket, I have no doubt that Netflix will be home to even more original productions in the coming years. Good.

Now is the golden age of television. There is more fantastic content available than ever before. Sure, the studios are a bit obsessed with superhero-based genres (La-La Land being a conspicuous and classy exception) but when it comes to the variety, quality and accessibility of amazing content there has never been a better time than now.

Accedo will be at IBC in its usual spot in Hall 14 (stand E.14) so feel free to drop by for a coffee and to share opinions, prophecies and predictions.